Tuesday, May 12, 2015

Economists as all-purpose sages: The case of Freakonomics

The original book Freakonomics, by Steve Levitt and Stephen Dubner, was a very fun read. But it also slightly annoyed me. Why? Because there's very little actual economics in it! The quantitative empirical work is mostly reduced-form regressions with natural experiments. That's a fine and good research technique, but it's not really special to econ - it doesn't include anything about market design, structural estimation of supply and demand, game theory, search, prices, general equilibrium...nada!

That covers three of the six chapters. The other three include 1) an ethnography of drug dealer culture by a sociologist, the excellent Sudhir Venkatesh, 2) a quick gloss of statistics techniques that applied mathematicians use to catch cheaters, and 3) a historical story about the decline of the KKK.

So this book has sociology, history, stats, and some general empirical techniques that could be used by any social scientist. That doesn't make it bad - most of the research the book showcases is really cool (though Levitt's own study, on abortion and crime, ended up having some serious problems). But it means that an empirical sociologist could easily taken Levitt's place as the technical co-author of the book, alongside journalist Dubner.

But it was an economist Dubner got, and Freakonomics was billed as a pop econ book, not a pop sociology book. Why? It seems to me that it's because economists are respected as all-purpose sages. Like I said in my previous post, economists get taken seriously on any topic imaginable.

To use an even more stark example, take the sequel, Superfreakonomics. There's a chapter in that book that's all about geoengineering. That's an engineering topic. A physics topic. A climate science topic. And yet an economist is put forth as an authority on whether it will work. And this is accepted by the book's legions of fans.

People trust economists on any topic.

Why? I don't know, to be honest. Maybe it's because economists are thought to have high IQ and know a lot of math relative to other social science disciplines. Maybe it's because economists are confident in their ability to model any social phenomenon, like Gary Becker and others of the "imperialist econ" school. Or maybe it's because economists are just more willing to engage with the public and hold forth on any topic. After all, op-ed writers are the other group who are treated as all-purpose experts; maybe economists just act like really hi-tech, super-smart op-ed writers.

Or maybe it's because of economists' reputation as being clear-eyed and impartial observers of society. For example, in the intro to Freakonomics, Dubner describes a scene with Steve Levitt:

An elderly homeless man approaches [Levitt's car]. It says he is homeless right on his sign, which also asks for money. He wears a torn jacket, too heavy for the warm day, and a grimy red baseball cap.

[Levitt] doesn’t lock his doors or inch the car forward. Nor does he go scrounging for spare change. He just watches, as if through one-way glass. After a while, the homeless man moves along.

“He had nice headphones,” says [Levitt], still watching in the rearview mirror. “Well, nicer than the ones I have. Otherwise, it doesn’t look like he has many assets.”

If you didn't know Levitt was an economist, this scene would just make him sound like a rich insensitive jerk. But the fact that he's an economist imbues the scene with a different meaning altogether - suddenly, Levitt's clinical detachment seems like a sign of impartiality and rationality. Exactly the qualities we'd want in an all-purpose sage.

Anyway, I don't know the answer. But the observation that people trust economists on any social topic - and even some engineering topics - seems pretty obvious. And pretty freaky.

P.S. - If you want a book that is nothing but hardcore economics, and explains everyday economic phenomena in a way that is humble, entertaining, and useful all at the same time, I recommend Tim Harford's The Undercover Economist. The best version is the audio version.

34 comments:

One theory: people realize that self-interest is much more of a driving force in our society than we usually acknowledge (as illustrated by all the conflicts of interest we tolerate and all the feel-good bullshit going around) and they turn to economists because they are often the only ones willing to acknowledge this.

You're certainly not the first person to complain that Freakonomics is light on actual economics. Greg Mankiw, Ariel Rubinstein, Steven Landsburg...join the queue!

But I'm not sure how Levitt's imperialism is evidence that everyone just accepted his word as unvarnished truth.

Take the geoengineering chapter in Super Freakonomics, for example. I honestly can't find a single positive review of that chapter. Here's the guardian summing up what seems to be the consensus view:http://www.theguardian.com/environment/2009/oct/19/superfreakonomics-geoengineering-wrong

I guess the majority of fans that accepted Levitt's word at face value was a silent majority? :)

Right, but if the general consensus was that the Freakonomics books had no idea what they were talking about - i.e. that they were just noise, and should not shift anyone's priors in the direction of their main theses - would all these people buy them, purely as entertainment?

Well, maybe I'm one of the few people living outside the econ bubble, but not all people trust economists, particularly macroeconomists, on any topic, and frankly they shouldn't.

Just look at the poor showing made by economists at the Fed etc on forecasting the 2008 financial crisis ("contained"), inability of the IMF to accurately forecast economic growth or Greek debt sustainability, all the childlike bickering and snide personal comments highlighted here on this blog by esteemed economists because neither side has enough evidence/proof to definitively win the argument, etc. etc. etc.

The economics brand has taken a deserved hit in recent years. Rather than knocking the empirical-sociology wing of the profession I'd thank them for helping to restore some credibility to the discipline.

I wonder if one the reasons why economists are treated as experts in so many fields is due to the way in which formal mathematics allows economists to state their conclusions very strongly. For example, after a long verbal argument a non-economist would conclude, 'it appears that x plus y lead to z' whereas the economist, after solving a set of equations, would conclude 'given equations x and y the above proof shows z.'

For those engaged in economic research, if one does not like the economic theory of 'equations x and y lead to z' they would know to question assumptions x and y. To the passive consumer of academic research, however, the statement of the economist appears to be much more confident.

OK, so there do not seem to be any current physicists who have sold "talk about all subjects" bestsellers as did Dubner and Levitt. But there have been physicists in the past who were (and still are) viewed as "sages" whose comments on many things get widely quoted. The obvious example is Albert Einstein, although he did not write some popular bestseller distilling his Generally Wise Sayings in one place (or if he did, it was not a bestseller to my knowledge), most of which indeed look pretty sage.

Stephen Hawking has had his Brief History of Time, which gave him his Brief Moment in the Public Eye (at least until the latest movie came out), with him having the extra interest of his disease, oh woe, to attract soap operaish attention. But, I must admit that with a few exceoptions, he has not made too many broader pronouncements a la Einstein, much less put out a pop bestseller discussing everythning, and few other recent ones have gotten all that much public attention, even Witten, who might have a problem writing a "talk about everything" book given that apparently he is not very good at economics, :-)..

It may be that economists have the edge on this sort of thing because our field does deal with society more broadly rather than esoteric hard science stuff, and we have the edge over all the other social scientists due to our perceived mathy smarts, even if both the mathematicians and physicsts (and maybe computer scientists also) edge us out on the strictly mathy smarts part. But, I would agree that when we get economists entering into making judgments about hard science topics, they are clearly stepping over the line, and the appropriate hard scientists should slap us down when we do so..

BTW, you poked at Tyler Cowen for writing a book about food, but a) he is a really serious foodie who knows good stuff, and b) there is an economics of eating out, and he has plenty of valid and interesting insights on that. You should cut at least him some slack on that one, :-).

Well, it must be noted that there have been some books by physicists with titles that look like "A Theory of Everything" (that mighht itsel fhave been one precisely), with some of these even selling pretty well, if not in the top 10 of the NY Times bestseller list. But, of course, these have been popularized accounts of one or another attempt at a Grand Unified Theory, with string theory being one of the leading candidates for that, but usually not going off into other areas such as where to eat in restaurants.

Ah, I think I have thought of one who has wandered a bit out of his range, albeit not onto the top 10 of the bestseller lists. That would Lee Slonim, the leader of the anti-string theory forces, whose recent ramblings about time have led him to cogitate somewhat more broadly, "philosophically," than what one finds in most of these books by physicists, although not yet into such areas as sumo wrestling or even geoengineering...

Not entirely true. I only trust economists who are not afraid to admit they were/are wrong when the data demonstrates the error of their way(s). This narrows down the list of economists I trust to the number I can count on one hand. Noah is one of them. :)

I think that the current tide of economists in the public sphere owes something to recent history - ie., the financial crisis of 2008 definitely brought economics to the front of many people's minds. If you went back to, say, 2003, the public sphere was more dominated by foreign policy and military experts, for obvious reasons (Iraq). So it's possible some of it is cyclical.

I wonder if the group of "random but surprisingly trusted experts" is confined to economists. The great Neil Ferguson is back in the news. Bernard-Henry Levy, notable mainly for his chest hair...I could go on

I'm not sure either economists or op-ed writers are trusted instead of just good at providing arguments in favour of certain prejudices.

Levitt is doing a lot with a single data point in that anecdote. The headphones could have been dropped on the street or thrown out by a store. They could have been given to him, maybe actually being hearing aids. Are there options less likely than a fake overcoming the social stigma of begging?

You can usually come up with alternate stories to the stuff in Freakonomics too.

Anon, I think you're missing Noah's point. Levitt was just being a tight bastard, but came out with the type of justification that people would mock if, say, Ted Cruz had raised it. Just because he's an economist, people said "oh, how insightful". The correct response would have been "oh, what a wanker".

I read Freakonomics, and my first reaction was to be persuaded on everything except the few topics where I am myself better than averagely informed. Then I found lots of other people saying 'he's only wrong about the stuff I really know about". But he does cater to a general awe of economics. Comment above captures it: economics=money=important. When people cared most about their souls, priests were given the same respect; when they cared most about their empires, soldiers pontificated.

I expect that in 50 years, ecologists and climatologists will dominate the talk shows....

The harford book is very disappointing so far. 2 chapters in, I am pretty bored. Nothing really surprising yet, except I guess for the fact that sometimes imb, oops IBM and intel deliberately sabotage products to allow for a range of pricing. So if anyone else is reading this and tempte, I'd say don't bother.

Excellent post, Noah. Even worst: Levitt uses to flaunt about the usefulness of economics to other fields, while making clear that he is a disciple of Gary Becker. On mistakes in his own theory on abortion, I like the one in Pinker's Better Angels.Best,Pablo MiraArgentina